Paddle: From a Failed SaaS Launch to a $1.4+ Billion Valuation
Christian Owens is the founder and CEO of Paddle, a payments infrastructure provider for SaaS companies.
Christian started building websites when he was 12 years old. He walked into his local high street stores and asked them if they wanted him to build a website. His first customer was an Indian Restaurant.
At 14 years old, inspired by Groupon, Christian persuaded a number of software vendors to participate in selling a discounted software bundle to their email lists and generated over a million dollars in sales.
Today, Christian is running a company that employs nearly 400 people, is approaching $100M in ARR, and has raised $300M in VC funding. Paddle also acquired Profitwell earlier this year in a deal worth $200M.
I originally interviewed Christian over 3 years ago when Paddle was doing around $10M in ARR.
In this episode, we recap some of the discussions from that earlier interview and talk about how Christian got started building his business as a teenager and eventually founded Paddle when he was just 18.
We talk about how he's grown Paddle over the last 10 years into a SaaS business that's close to hitting 9-figures in annual revenue. And he shares the background of how the Profitwell acquisition came about.
We also chat about his entrepreneurial mindset and what he does when he has a new business idea. He shares some interesting insights that might inspire you the next time you have a great idea.
I hope you enjoy it.
TranscriptClick to view transcript
In this episode, I talked to Christian Owens, the founder and CEO of Paddle, a payments infrastructure provider for SaaS companies.
Christian started building websites when he was just 12 years old. He walked into his local High Street stores and asked them if they wanted him to build a website. His first customer was an Indian restaurant at 14 years old. Inspired by Groupon Christian persuaded a number of software vendors to participate in selling a discounted software bundle to their email lists, and generated over a million dollars in gross sales.
Today Christian is running a company which employs nearly 400 people, is approaching a hundred million in ARR and has raised $300M in VC funding. Paddle also recently acquired ProfitWell in a deal with around $200 million. I originally interviewed Christian over three years ago when Paddle was doing around 10 million in ARR.
In this episode, we recap some of the discussions from that earlier interview and talk about how Christian got started building his business as a teenager and eventually founded Paddle when he was just 18 years old. We talk about how he's grown paddle over the last 10 years into a SaaS business that's close to hitting nine figures in annual revenue, and he shares the background on how the ProfitWell acquisition came about.
We also chat about his entrepreneurial mindset and what he does when he has a new business idea. He shares some interesting insights that might inspire you the next time you come up with that great idea. So I hope you enjoy it. Christian, welcome to the show. Thank you for having me. It's been I think three and a half years since we, we last talked.
There's been a lot going on in the world of Paddle, and it seemed like a great time to invite you back and, and catch up on what you've been up to. So thanks for joining me and it's great that this time we're actually recording in video, so I love that. Tell me for people who aren't familiar with Paddle what does the business do, who's it for and what's the main problem you're helping to solve?[00:02:19] Christian: Yeah, so we are, we build a product for other SaaS businesses, so other subscription software companies. Primarily to help them with sort of all of the back-office elements of selling their products and running the business. So everything from core payments and how they take payments from people to recurring billing, invoicing and more recently how they run the business from metrics benchmarking, retention and growth perspective as well. [00:02:47] Omer: I mean, obviously in the last interview we, we talked about how you had started building websites when you were 12 years old, and then eventually how you ended up starting Paddle and, and grew it to about 10 million ARR which was back then.
I, I don't know if you talk, or disclose revenue numbers these days, but can you give us kind of like a ballpark in terms of the size of the business, how much money you've raised so far, number of team, et cetera?[00:03:14] Christian: So we're 370, 375 people. Today we've raised about $300M and we don't disclose exact revenue, but we're approaching a hundred million. [00:03:26] Omer: That's nice growth in the last three and a half years. [00:03:29] Christian: Yeah, it's been a, it's, it's been a, it's, it's been an interesting time. [00:03:34] Omer: Let's, let's go back to when you were 12. That's when, when we last talked, I remember you had said that's when you started to learn how to build websites, and then you decided you were gonna go and walk into local businesses and ask them if they wanted a website.
And I, I remember you telling me that, you know, some of them just laughed at you and didn't take you seriously at all. And, and then eventually you found some people who were willing to give you a shot. And that's kind of how it all started. So just, just tell us in your own words, like, you know, how, how did that all come about?
Why, why as a 12-year-old did you want to go out and, and start building websites for local businesses? Like what was driving you?[00:04:19] Christian: Yeah, I was just really curious about how things worked. Sort of, I was the type of kid who would get given like an old kind of appliance of some kind, like an old VCR or something, and would immediately just take it apart and try and figure out how it worked.
So it was a very similar thing when I found kind of the internet and computers. So immediately sort of decided that I wanted to figure out, not like what were the coolest websites to visit, but actually how does one of these things get made. So that was kind of like the, self-directed kind of journey into wanting to figure out how websites are built and starting to build them.
And then sort of always having kind of an inkling, not necessarily for business per se, but just wanting to do something useful. And rather than building a bunch of websites that were just about kind of hobbies or interests that I had, maybe kind of the businesses in the, the town that I grew up in, needed one and didn't have one.
And I could kind of plug that gap and sort of make some pocket money sort of while I did it. So really that was, that was kind of the motivation. It was like I had a, I'd learned a skill, I had the desire to put the skill to use, and sort of, it was like the most obvious sort of thing that was directly in front of me which was sort of these local businesses to go and do it for them.[00:05:37] Omer: Do you remember the first business that you built a website for? [00:05:40] Christian: I believe it was a restaurant in the town that I grew up in called Bombay Dynasty which was the local Indian restaurant that I, it was calling it a website. It's probably a stretch. It was more like transcribing a menu online and putting a phone number next to it so people could kind of call up and, and order for delivery. But I believe that was the first one. [00:06:02] Omer: And then you did that for, for a little while and then eventually I think the next thing you built was Invoicing app, right? In Mac app.
Yeah. So[00:06:12] Christian: these businesses, sort of, some of them being legitimate businesses actually wanted a receipt or an invoice for, for some of these websites that I was making. And I kind of went home one day and I was like, I didn't even know what an invoice was. So immediately Googled like, what is an invoice? How to make an invoice. And I think it was like QuickBooks or Zero or something kind of came up. And it was like, it was, I, I don't even know what it was. It was like 10 pounds a month or something to buy, subscribe to, to QuickBooks so it could make invoices.
And I was like 10 pounds a month. That's crazy. I think you have to bear in mind, I was probably charging like 50 pounds to make someone a website. I was like, 10 pounds a month. That's crazy. I can build this. So that started the, the transition from building websites to building software. So I taught myself how to build kind of things that were slightly more robust than a menu that I was transcribing online and started building invoicing software initially for myself so I could send out these invoices.
And then invoicing, software became invoicing and time tracking. And I fell in love with building a product that solved a problem. And sort of that absorbed all of the free time that I had as a kid, like kind of building software rather than kind of these websites anymore. But then wasn't making that kind of bucket money anymore, sort of making the websites for the local businesses.
So instead started just selling the software and started selling it sort of just online, kind of posting about it in forums and things like that, and kind of got a few customers and then from there kind of had, this was sort of probably like 2008, 2009, sort of when I was starting to do some of this stuff through kind of 2010.
So I, I think if you think back to sort of the internet and some of the businesses that were popular at time, it was like Groupon. It was the daily deal craze of like every, every other email in your inbox was some discount for something. And I was, I kind of latched onto that idea and was like, what if we created Groupon for software and we created sort of either daily discounts or bundles of software.
So if you're buying invoicing software and you're a photographer, you're probably buying some other things. Some like a CRM, maybe sort of photo editing software, maybe something else and something. So it started basically from the invoicing thing, packaging those up into sort of bundles of software, selling them at a discount.
And that became the first real business sort of, that was generating real revenue that, that I started working on.[00:08:44] Omer: So how, how did you do that, right? Because I mean, it wasn't just your software, right? You, you were going out and convincing other software businesses to kind of participate in these bundles.
You hadn't done it before yourself. And so it's, it's kind of like, like how did, how did you persuade people to say yes and take, take a, you know, a gamble on you?[00:09:11] Christian: Yeah, it was sort of like a, a perfect storm of things. Like one, I think it was definitely right place, right time in terms of deals, bundles, sort of the idea that kind of, you could sort of like the phenomenon of like, Groupon was sort of like, you could create like an offer for something and you could sell 20,000 of them in 24 hours.
And by selling 20,000 of them, even if they were 50% off, it would provide you with this one huge injection of cash into a business very, very quickly for zero kind of upfront cost. And two, it would provide you with 20,000 new customers that you could go and market other products to and upsells and things like that.
So recognizing that sort of, and the, the beauty of kind of this being kind of 15 years ago, 18 years ago, something like that, was that sort of, all of this stuff was happening over email. And over email it was just Christian Owen and sort of, there was no picture, there was no sort of, Anything kind of going along with that, that told people I was a 14-year-old building this business.
So providing the, the things that I was saying in the email made sense and sort of, I was relatively articulate with how I was writing them. Sort of, you couldn't tell whether I was 15 or 50. So kind of you have this natural credibility that's built into kind of cold emailing kind of these businesses.
And the pitch was very simple. The pitch was, we're doing the, the freelancer bundle we've got this invoicing software and this project management software and these eight of the tools or seven other things, we'd like you to be involved as well. Between these seven other companies, we have a combined like email newsletter list of 250,000 people and each company who would be in the bundle would have to agree to email it to their kind of email list at least once during the promotion.
So we have a combined list of 250,000 sort of people, kind of, we're gonna sell it for the retail price of all of these things is 500 bucks. We're gonna sell it for 50. We're gonna run it for a week and sort of, we're gonna aim to sell sort of 5,000 copies of this and everybody will get sort of a share of the money.
And everybody will also get sort of two things. They'll get the list of 5,000 customers who purchased it, and they'll also get the, any customers who signed up to the email list to be notified about future promotions, kind of on that specific promotion itself. So while we're promoting it, so you get exposure to 250,000 people for the product, you get a share of the revenue from this thing which is probably like a reasonable amount of money. It's tens of thousands of dollars and you get access to these customers probably 5,000 ish who would buy the thing. And this was sort of pre-SaaS being as mainstream as it is today. So a lot of these products were perpetually licensed. So we're talking about sort of things like kind of Photoshop and sort of one password back in the day where you would pay 50 bucks for one password version six, and then 24 months later, version seven would come out and you'd have to pay again.
So there was this huge benefit to these businesses who were on this perpetual license model to within six months of them planning to release the next major version of the software to actually get 5,000 customers. Because those 5,000 customers, some percentage of them would go on and then buy version 6 or version 7 or whatever the next one was.
So it was sort of, there was no real downsides to this. It's not like kind of we see today in SaaS some of these like websites and love, the love the company like App Sumo and kind of Noah Kagan and, and sort of people like that who do the idea of a lifetime deal. Whereas these very much weren't lifetime deals.
You were buying version 6 of this product and version 7 was gonna come out and there was an opportunity for you to monetize that customer immediately. So after the first one, the first one was really successful. The first one sold, I think 20,000, 25,000 copies made over a million dollars in gross sales.
Kind of each of the participants in there got at least, and the, the, the revenue share that you got was relative to the price of your product. So the minimum amount of money that somebody kind of got from that was I think like $50,000. So as soon as we had this sort of initial case study, it kind of became a little bit of a race of how many of these could we do as quickly as possible.[00:13:58] Omer: So you said there was a, a list, a combined list of 250,000 email addresses that you could promote the, the products to. How big was your list at the time? [00:14:08] Christian: Zero. Zero. [00:14:10] Omer: Love it. [00:14:11] Christian: Very quickly, we amassed within 18 months, I think we had 400,000 people subscribed to our lists. So sort of like who were specifically subscribing to the bundles to get notified of those.
But from, and those were just all people who came from this, this sort of collaborative cross-promotion or had purchased one of the bundles, but day one it was zero and it was sort of just the thing that we were bringing to the table was actually just the orchestration of all of this. So we had to build a website and it had to take payments.
Then we had to split the funds afterwards. In later promotions as well. We'd, we'd allocate a proportion of the sales to actually like paid advertising for these things as well. But yeah, the first one it was, was zero.[00:14:54] Omer: And then how many more of these did you do before you, I think you basically told your parents that you were gonna quit school and, and start working on this full time, right? [00:15:04] Christian: I told them that after the first one. [00:15:08] Omer: How, how did that go down? I, I can't remember what you told me. What happened when you told them that? [00:15:12] Christian: It was kind of a conversation that was sort of a long time coming. They'd kind of seen me doing this stuff sort of online and I think they were always, they were always very supportive of that.
I think initially when I made some of this initial money, they didn't really actually know that I was doing this in the background. So kind of there was first a conversation which was, I've started this thing. It's actually been very successful, like kind of. Sort of breaking that news first, and then the kind of the second tranche of news was, and also, and I think I was like 15 at the time, kind of going on 16 and, and sort of it was, I want to quit school at 16 and focus on this.
And basically the, the arrangement was like, they weren't particularly happy about it, but they could see that this sort of initial thing had been successful. And it was sort of always the case of like, we'll let you do this the moment that it kind of stops working. Or that sort of, it's not a job anymore. Like you go back to school or you continue education and you get a job or whatever.[00:16:12] Omer: And then tell me how that business eventually led to Paddle, because it wasn't Paddle created because it was, it was basically another tool that you were trying to build to support this business is that, I remember how things started. [00:16:29] Christian: We were doing sort of, we started once, we kind of did the first one and then got into a cadence of doing these, We were trying to do one a month. And then we started doing kind of daily deals on-site alongside that, once we had this base of 400,000 people, so it was like kind of 1Password is about to launch the new version.
So they come to us and they say look, we're gonna, we're willing to do 50% off 1Password 6 because we know in six months time we're gonna be able to kind of sell these customers number 7. So we started doing that as well. I think very quickly got to the point where we were doing millions of dollars of sales kind of run rated, sort of on an annual basis.
Like we didn't quite peak, like the individual bundles didn't quite do as well as the first one did. Sort of like they sort of average, ended up averaging doing about 2 or $300,000 each, but we're still very successful and kind of, we were able to replicate that model. So we were doing sort of several million dollars of sales for this as well as sort of the invoicing product as well, which is a standalone was growing and, and doing pretty well.
So we're doing millions of dollars in sales from hundreds of thousands of people all around the world. And sort of, this is kind of, you have to remember this is, this is pre-Stripe, this is pre-Adyen, it's pre-Braintree, it's pre any of these, sort of like today how we think about kind of just doing any type of transaction online.
It was pre any of these technologies existed. So we are doing a hundred percent of this volume through PayPal. Some countries didn't support PayPal, so we had to sign up with like a local like merchant acquirer, like how do you set like all the forms you have to fill in to accept a credit card online?
And that, that was hard enough, just the payments piece. But then we started wanting to do subscriptions, so we wanted to launch a kind of like an Amazon Prime style subscription where if you were a member of this sort of subscription membership, you'd get additional discounts and exclusive deals and things like that.
And that was really hard. We found that taking a subscription payment was really difficult and we started to see a lot of these SaaS products, transition to subscriptions, and then we started getting hit with fraud and chargebacks and things like that. Just people trying to steal the software by stealing credit cards and things like that.
And then all of this complexity of selling in all of these different countries in relation to, we had to pay tax in all these countries like sales tax, VAT and sales tax. And it was sort of at that point in kind of, I was enjoying running this business and, but at that point I was just so frustrated with the amount of time that we were spending on how do we calculate and file and, and pay taxes?
How do we accept payments? How do we deal with this fraud problem? How do we be compliant with all of these different things? How do we take subscription payments? How do we make sure our invoices are compliant in France where you need to include extra information on them, or the right exchange rate or whatever it is that I kind of emailed the majority of the people that we'd ever worked with in these promotions, sort of asking them how they solved these problems in their companies.
Like what tools did they use? And I was really just in such of, can I buy a thing, implement it, it works in the background, it deals with all this stuff for me. And that didn't exist. I got a set of responses back, which were. Basically, Oh, we use 10 different things. We have the same set of problems that you do.
Yeah, we get hit by fraud too. Oh, we have sort of three accountants across two, three different countries who help us with these local sales tax things, which wasn't really the answer that I was looking for. I was just looking for, oh yeah, go buy this thing, kind of implement it. It works because it seemed crazy to me that basically of these 30 people that I emailed or however minute it was, we were all trying to solve the same problem as each other.
Like we all had exactly the same pain point. These were low-price, high-volume software products being sold entirely internationally. Like kind of borders didn't really exist and we were all running into the exact same problems. So it was at that point I was 17 and decided that sort of, that was gonna be the next business that, that I started really not knowing exactly how I was gonna solve the problem, cuz I still had the problem myself.
But knowing that sort of, That problem set was the thing that I was gonna go and solve. So sort of hired somebody to run that business. Moved to London and met my co-founder of Paddle, Harrison, who I'd been working with on the previous business as well. He was doing some organizing these partnerships with, with these companies, and we moved to London, rented a, a house together and basically just started building Paddle.
So it was really just like the, the experiences of, of trying to run that at scale and then talking to dozens of, of people who were having the same problem that decided to, to try and do something about it with Paddle.[00:21:11] Omer: Did you do any other kind of validation of, of the problem or just based on your personal experience and then emailing these partners and hearing back this consistent feedback that was enough for you to feel like there's, there's enough here. The problem is significant enough to, to invest your, your time and money going forward. [00:21:32] Christian: Yeah, that was, that was pretty much enough. I kind of, I kind of figured it as we'd built really good relationships with 20, 30, 40 software companies at this point. We'd made them significant amounts of money and sort of, we got them substantial numbers of new customers that if we built a reason and they were all complaining about this being a problem, that if we built a reasonable solution to this problem, then at least a proportion of them would use it or give it a try.
And I was really building kind of based on my own experiences, so I kind of had a pretty solid idea of what it needed to do. So that was the extent to the the, those emails and talking to some people was the extent of the validation that I did. Just on the basis of like, I had the problem, I'd kind of like fully been engulfed in it for the, the past the kind of two and a half years before.[00:22:22] Omer: Tell me about what, what goes through your mind when you, you kind of have these ideas for a business. You know, lots of, lots of teenagers build websites. They then don't go out and start, you know, walking into local businesses and trying to sell their services or, you know, at 14 reaching out to companies and trying to basically do these JV-type deals.
So there's, there's obviously, there's something about the way you think and approach problems that it, that, that kind of lets you move and start running with these ideas quickly. So what is it, is it just you, just, is it just the curiosity when you have something there and you're like, Okay, I just wanna go out there and see what it is or do, do you just feel like you have a, you know, very high sense of confidence about yourself and your ability to go and do these things? So what is it, because there's, there's something about you with all of these examples that we've talked about, that you come up with an idea and you just sort of, you sort of just start to run with it.
And a lot of other people might never do anything, or they might be like, wow, that Paddle idea. Yeah, would love to solve that. But it feels so massive and it's such a pain and I wouldn't even know where to start. So just, yeah, give, give. What goes, when you think about these, these business opportunities, what, what do you think is the difference with you that makes you start running with the idea?[00:23:56] Christian: I think that I kind of see these sort of business problems as just any other problem. And it's sort of like, if you think about the, if you think about the. I'm sort of, I'm getting old enough that I can say the word career now, which is interesting. But like, if you think about the kind of the journey of my career, it's been experiment with something, have an issue with it, try and solve the issue.
So it was, build websites for people. Someone asks for an invoice, dunno how to make an invoice, create a thing to help me make invoices. Like want to sell invoicing software instead of building a website for people. Oh, what's the thing that I don't have? I don't have customers. Who has customers, other software companies.
Can we partner with them to get their customers? Like building that business. It's commerce is really difficult. Okay, commerce is really difficult. What's the solution? I don't know, but there is a solution. I'm, I'm dealing with it today. Other people must have this problem. I'm gonna go and try and solve.
Gonna go and try and build the product I wish I had when I was building that company. So does that, does that very much sort of like each subsequent thing is linked to the previous thing in terms of just general experiences kind of, which I think has served me well. I think the second thing is I'm just deeply at the end of the day, like I'm the people off at me.
Like for I'm just the biggest pragmatist. I am like what is the most pragmatic solution to the problem that is immediately in front of us that we can go and implement? And like I get excited about dreaming about kind of the vision of the thing that we could create as well. But I don't, I think the, the thing that a lot of people do is they get so fixated on how the world will look if everything that they are telling themselves that they need to believe in order to do this, they get so fixated on the end outcome that they forget to start.
And I think that I get so excited about the end outcome that I can't wait to start. I'm like, Oh, if we did, and I think it's probably because every subsequent thing has led to the next thing for me that I kind of realize that sort of these things are incremental. And they ultimately compound sort of like the business I run today is sort of, kind of orders of magnitude greater than the business that I ran to begin with, which was building websites for people.
So it's, I think it's sort of just being unafraid to kind of just chip away at a problem. Like the first version of Paddle wasn't particularly pretty. And to be quite honest, like there was a part of my brain, which was like, not even just every software company, every company in the world will use this one day, but that wasn't, I didn't expect that to happen day one.
I was just excited that if I could, those 20 people that I emailed if 10 of them decided they were gonna give it a shot. So it was sort of, there was a deep kind of like pragmatism in each of these things. And I also think kind of, even though we're, this business is venture-backed and we've raised $300M from day one, there was a sense of this thing has to be a real business.
Like from day one, Paddle made money, like when we signed the, the first customer who started using it and they started transacting through it, it made money. From day one, the bundle business made money. From day one the invoicing software company made money. So it was, I think kind of the other flip side to the, the thing I was saying earlier is I think that sometimes people get so fixated with the end goal that they forget that the first thing that they create, the first iteration of it also has to be a business.
And you see like all of these companies who go for kind of distribution and kind of huge scale, and they'll figure out how they monetize it later. And maybe in the current market that we're in, that's changed a little bit. But I think my approach was always the opposite. It was always, It can't just be like the minimum viable kind of version of the idea, but it has to be the minimum viable version of the idea that we can monetize because it's only with creating something that is monetizable, that generates revenue, that we can take that revenue and reinvest it into creating something greater, and that itself will compound.
So I think that's just sort of the framework if you can call it that. That I, that has always sort of been the thing that I have used to sort of decide what the next thing to do was.[00:28:16] Omer: Now, the interesting thing with, with Paddle is that you were super excited about building this product, solving, solving these problems.
And when you, how long did it take for you and Harrison to build and, and ship the first version of Paddle?[00:28:34] Christian: From initial idea moving to London, sort of incorporating probably six months. [00:28:41] Omer: And then the excitement, what happened to that level of excitement when you, when you shipped the product and then realized that people didn't seem to be as interested in it as you thought they were going to be? [00:28:56] Christian: Well, I think that the story there was really one of, of, kind of our hypothesis was correct. In the initial version of Paddle people wanted a better way and an easy way, easier way to sell software or run a software company. I think that I was leaning a little bit too heavily on kind of the experiences of the previous business in thinking that actually the best way to do that was to build a marketplace for software, which is what that, that first after six months version of Paddle was rather than just the infrastructure to power kind of the selling of software.
And it was really kind of, it was get six months in, launch the marketplace with a handful of these businesses that we'd worked with on the previous one as well in the marketplace. The realization that a marketplace really needs two sides in order to function. But actually the commerce engine that we built behind the scenes to power this marketplace was really what people wanted.
They wanted the guts of a marketplace. They wanted all the, the checkout, the payments, the recurring billing, the invoicing, obviously telling the story now, and, and kind of the preamble to this, that seems really obvious. Like you had a problem with billing and invoicing and payments, sort of, why didn't you just build a solution for billing and invoicing and payments?
Well, I think you sort of, I think you have to place yourself back in, in 2011, 2012, kind of again, pre-Stripe, pre any of these things. What was sort of, what was the nicest experience that somebody had buying or selling something, a piece of software online? It was the App Store. It was the App Store and iTunes and kind of kind of Audible and, and sort of things like that.
So really that was what we were trying to emulate, but for a more robust type of purchase, a larger purchase than the 99 cent in-app purchase that you were gonna do. And then it was sort of, it was only kind of through that iteration that we then realized that sort of actually trying to build a marketplace was probably silly.
And what these businesses wanted was, was the guts of one, the underlying infrastructure that powered it and all of the kind of ancillary services that those marketplaces are doing for you. And that's really what Paddle became within the, the following six months. And it's really what we are today obviously at a bigger scale with more products and more functionality, but, but really it's, it's sort of the underlying infrastructure of, of how you power a subscription marketplace.
And we're, we're, we're giving that to companies so that they can use it to power their own businesses.[00:31:19] Omer: So in, in, in the last interview, we, we talked in, in more, more detail about how you grew the business to around 10M ARR. Over a period of about, I think six, six or seven years. And I don't think we necessarily need to repeat that again.
We can provide a link for people to go back and, and listen to those details on the previous episode. But let's talk about the last few years and, and sort of effectively the business going from 10 million ARR to, you know, as you said, getting close to a hundred million. That's, there's a lot of been going on and, and I think what I'm maybe want to just talk about first is as, as, as you and I were talking earlier, part of this growth has come from you and the business being able to move upmarket and, and start to reach bigger and different types of customers.
But even that wasn't a straightforward change to the business and, and you had a false start and some, some failures along the way. And I think there are some good lessons there that, that we, we should share. So maybe let, let's start with that. Like when, at what point did you decide that, look, we need to move upmarket, and what did you do to start making that transition for the business?[00:32:41] Christian: So I think it's, it's probably worth the context that for the first five years of the business, four or five years of the business, we never really thought that we would we never thought we would be able to make that transition. The assumption that we had was at some scale and obviously that the upper bound of that scale has changed over time.
At some scale, this problem becomes one that you wanna solve internally. And sort of seven years ago, kind of us was definitely sitting there and saying a business doing $200M a year, which was an unfathomable kind of scale, is obviously gonna build teams and do this stuff themselves. And then you actually talk to one of those businesses and they like, hell no I don't want to build that infrastructure myself. That's super complicated and sort of, I have to do it across how many countries. And you realize that actually every business of every scale has so many things that they would rather be focusing on than back office infrastructure. So it's probably worth starting with, I think we were coming from a mental starting point of we didn't think that we would be able to do this or that it just wasn't even a feasible, viable option for us as a business.
We were essentially kind of dragged upmarket. If you think about the way kind of our business works is sort of in the early days we were signing kind of these, these startups and they were doing maybe 20, $30,000 a month in sales. And they were growing very nicely and, and doing very well. And, and over the years sort of, you realize why investors love to invest in SaaS companies and it's because some of those businesses that are doing $20,000 a month.
A couple of years later are doing $200,000 a month and a couple of years later are doing $2 million a month, and so on and so on. So sort of naturally, like the largest customer that we ever assigned in the first couple of years was probably no greater than doing kind of a hundred thousand dollars a month in, in kind of sales themselves.
But fast forward 3, 4, 5 years, and suddenly those were 20, 30, 40, 50 million dollar businesses kind of still running on Paddle. So kind of the, the largest customer that we'd ever sold to was maybe doing a million bucks, but the largest customer we had was doing 50 million. So you can understand how that maybe leads you into a false sense of security that you're ready to go and sell to a customer that's doing $50 million in sales.
And then you realize that you've never actually built a sales process or a product onboarding process or kind of maybe some of the functionality that a $50 million business sort of looking to scale to a hundred million dollars might expect from this product. So kind of that sort of probably three, four years ago led us into this full sense security that we were ready.
We already had customers that were doing this much revenue. We were ready to go and like, make that the primary source of new business. So we went, we hired some really incredible salespeople sort of who are used to doing these upmarket deals. And we started, we pointed them in their direction of like, here's a bunch of logos that we want you to go and win and here's the value prop and, and kinda go for it.
And then very quickly realized that sort of these businesses sort of, it's one thing getting the three-person business who's doing $50,000 a month, to go and say, we have $50,000 going in this direction and it needs to go in this direction. We're gonna point at Paddle. It's a very different thing to get sort of a 400-person organization that's doing 50 or a $100M in sales to cur suddenly uproot all of this back-office infrastructure and point in our direction.
And we didn't have sort of the, the sales process. We didn't have the way to demonstrate to them the ROI of doing this. Even though we knew once they were on Paddle they would grow faster and they would run the business better. We didn't necessarily have the ability to articulate to them that actually the work required to do the transition was gonna be worth it.
And then equally, we didn't have some of the, the functionality that they needed. Things like sort of, even things such as sort of like two-factor authentication in the dashboard when you log in. You suddenly realize that if you're selling to any business that's doing more than 20 or $30 million in sales and who has hundreds of employees, suddenly they, they care about security.
They care about how, kind of like password management and sort of how like the rules around that things are set or the enterprise functionality around export and audit and things like that that they need. So we didn't have any of that. So we'd hired these, these sales reps and sort of probably after about six to nine months, they all quit.
This sort of very senior, very expensive set of kind of strategic account executives and BDRs and people that we'd hired all left. And you very quickly kind of come to the realization that the best possible salespeople want to work for the easiest, the, the products that are easiest to sell, or not necessarily the easiest to sell, but the ones that have really great ROI have really articulate the ones that you can really easily articulate kind of the immediate value proposition, the immediate return on investment a customer's going gonna make. And we just sort of, it's not that we didn't have those things fundamentally, it's not that sort of for the 50 or the a $100M business, buying Paddle was a bad decision.
Actually, it's a really, really good decision and you, you make more and you save more sort of by doing so, it's just, we hadn't built any of the infrastructures in order to be able to articulate that to a customer. So we couldn't equip any of these sales reps with, with the ammunition that they needed to go and have those conversations and learn the hard way that sort of, like the easiest way to lose a great sales rep is when they can't sell anything and they can't hit their number and they can't make commission and they can't kind of do all these things. So that was sort of a bit of a wake up call for us, sort of two, three years ago and realizing that actually even though our largest customer was doing 50 or a $100M in volume through us, like we didn't have the sophistication to sell to a customer that was as large as the largest customer that we already had.
So then it became just incrementally, how do we understand each of these segments? How do we understand how these businesses change as they grow what their requirements are. So investing in products, doing more research building collateral, sort of building the functions around sort of sales. And sales enablement in order to enable us to do that.
Unfortunately, today, we're in a position where we're now able to go and sign sort of those, those large enterprise deals. Sort of like just this year we've, we've signed Verizon with their BlueJeans product. We've signed for Fortinet, which is a big public security software company we've signed ServiceNow. So sort of these huge companies are now kind of going with Paddle and it's because we've just been able to actually articulate the value that was always there that we just didn't have the actual capability to, to tell these customers about previously.[00:39:26] Omer: So I'm a little confused about that because it sounded like that you were doing that the first time around as well. So you're building a, a sales org. You, you talked about, you know, we are equipping them with the value prop and all of these things to, to go out and sell, but it did it, it didn't work. It was a struggle for them to sell. So the second time round, like how was that different? [00:39:54] Christian: I think the first time around we were building the value prop that the million dollar cust, the million dollar a year business bought from, even though now they were a $50M business, but when we won them they were a million. We were using the same rationale and the same arguments and the same sort of things that we thought were important to them.
And then pointing all these businesses and being like, Yeah, but look this business that's also the same size as you use as Paddle. And they chose us for these reasons and not really kind of necessarily being like, they chose us for those reasons when they were doing a million dollars a year. If you ask them their reasons that they continue to use Paddle like it's a whole different set of reasons.
And we hadn't built any of the cases around those whole different set of reasons. So the second time around, we were much more educated about the actual buyer who was going to be buying Paddle today. And we were educating them on the reasons that the $50M company uses Paddle as a $50M company.[00:40:48] Omer: Got it. Okay. That makes sense. You also you mentioned earlier that you'd raised close to $300 million. Your last was around, was like a Series D. Was that, was that the round, was that during Covid you raised that money? [00:41:05] Christian: Yeah, so we've raised two rounds since, since I think the last time we spoke. So we raised about a 60ish million dollar round during Covid.
And then we raised a $200 million roundabout three or four months ago. But that $60 million round during Covid was, was sort of an interesting one because we were, we were in some respects sort of in, well in retrospect, looking back on it, we were a net beneficiary of Covid because so many businesses around the world and so many software companies grew so quickly.
So they had a need for both the infrastructure that we provide in helping them kind of scale and grow and, and manage commerce. But then also the, the hundreds of businesses, or thousands of businesses that were using Paddle at the time also themselves, source of significant growth. If they were building video conferencing software, suddenly their business tripled overnight.
So we were net beneficiaries of, of covid. But at the time that we were doing that, that fundraising, it was we were probably raising it in April, May, 2020. So if you think kind of lockdowns and things started to happen in, in March, we were six to eight weeks in the kind of economies were starting to shut down.
Nobody really knew what was gonna happen. Everybody kind of thought they were gonna die, like kind of, they certainly thought they were gonna be financially ruined. So sort of really us sort of, at that point, we were, we were kind of like in, in, in retrospect, we probably would've been fine had we not raised that money, given how quickly the business grew because we were net beneficiaries of Covid.
But we were sort of sat there at the time as with every other business kind of looking into, looking at the world around us and sort of watching. And I think everybody had the feeling of like, is this is like the end of the world? Like what, what is happening here? And sort of, we made a decision to raise I think $68M in, in kind of the depths of covid, probably at a much lower valuation than knowing how the market then performed afterward, 12 months later that we would've been able to raise at.
So it was an interesting kind of decision-making process where at the time it felt like we were the luckiest people in the world to be in the privileged position to have a business that was performing well during Covid, and we were able to raise capital. And then 12 months later, you're like, wow, that was probably a 50% discount on the valuation that we would've got with the same metrics that we had then, but now.
And it's kind of a similar story with the round that we've, we've just raised but kind of the inverse of we closed a 200, 210 million kind of series D in April of this year. And actually April of this year. If you think about the time at which sort of we were raising money, it was sort of January through April, kind of the peak of like the tech market was December.
So January through April, that whole period of time that we were raising money that the market is going sharply downwards. And I think if we hadn't closed that round when we did in, in, in, so we closed it roughly in in March and announced it in April, sort of if we had closed that round four months prior.
And we announced the, the valuation, it was at a 1.4 billion valuation that we raised that money. If we'd raised that money four months prior, our valuation probably would've been 3 billion. But if we'd raised and, and we would be in a position now where the market is very much corrected and we would be spending the next several years trying to grow into a 3 billion valuation.
Had we raised that money two months late, two months later, we probably never would've closed it because the, the whole market went, went kind of completely down and, and sort of fundraising dried up. So it's sort of like, it's one of these things where I think kind of, it's sort of like, it's definitely one of those, like a burden in the hand things, but it's also sort of like a reminder that I think like we spend all of our time as SaaS company founders or executives, almost trying to predict the future a little bit and sort of, we often forget that really 99% of our job outside of predicting the future and kind of pontificating about these visions that we have in the future, 99% of our job is analyzing the data that we have immediately in front of us and just being able to make a decision using that and not being paralyzed by those sort of kind of data points and decisions.
And I think that like we managed to build a 1.4 billion company. We managed to do a really great acquisition earlier this year and in buying ProfitWell and sort of really it's because sort of every stage we just evaluated exactly where we were at and did the right thing for the business in our shoes at that point in time, rather than trying to make all of these bold predictions about what was gonna happen.
Because if in January of this year when there was a little bit of a blip of the market, we were to say, nope, we'll pause this. Like last time that we did a fundraiser, if we'd waited 12 months, we would've got double the valuation. Well, if we'd taken that same approach and tried to predict the future in January of this year, we wouldn't have raised money at all.[00:46:17] Omer: I spoke to Patrick a few weeks ago and kind of got his perspective on, on, you know, the, the acquisition. But from, from your side, at what point did you, did you decide that you wanted to acquire Profitwell, and, and what was the, the main driver for that? [00:46:35] Christian: The what point did you decide is an interesting question cuz I probably decided to stand alone in my head maybe two years ago that I thought it was a good idea.
At what point did I have a discussion with Patrick and then kind of come to an actual decision? It was sort of November of, of last year. And we'd been talking for sort of a few weeks about it. Really, the, the, that came together because the, the missions of these two companies were so similar.
They were so similar, but the products that we were creating were so had so little overlap. So they were so heavily complimentary to each other. And the missions being similar was both of our mission was essentially to help run and grow SaaS and subscription companies automatically. And sort of we'd taken one approach to that, which was how do we build this core underlying operations, operating infrastructure to help with payments, requiring billing, taxes, all of the stuff that you don't want to deal with.
And their approach had been how do we actually set on top of systems that you use to do those things, to give you insights, metrics, benchmarking, help with retention, pricing, kind of all of these things. How do we build tools that augment those systems and help you be more effective? So it was really a combination of these two missions and these companies were basically identical, slightly different approaches or slightly different kind of levels of altitude to how that we were approaching the same set of problems.
And then this natural kind of feeling that, okay, sort of if we join forces on this, we'd be able to create, create something that's sort of like truly grid in the sum of its parts. So that, that was the rationale and kind of, Patrick and I had known each other for a couple years before. So sort of we'd probably, actually about four or five years before we'd met through conferences and, and things like that.
So we had a pretty good relationship with each other anyway. And, and sort of we, we, the more we started talking about things like how these two business cases just work together in terms of a partnership or co-marketing or whatever, the more we realized we were just trying to achieve the same things and why spend sort of kind of double the brain power, trying to kind of do it at two slightly different levels where we could actually just join forces and, and create something that's that's, that's much greater as a whole.[00:48:43] Omer: Yeah. It's certainly interesting to see where, you know, where you guys take that and, and kind of combine forces what, what this new business and, and, and product looks like. One thing I do want to ask you before we get onto the lightning round is, you know, whenever you, you, from the conversations that you and I have had today, a few years ago, you know, you've always struck me as, as very much a product guy.
Like, you love finding these problems and rolling up your sleeves and building solutions. And now it kind of strikes me that you are in a very different place now where the company is, is, you know, based, you know, billion dollar company, hundreds of employees. I know you've been hiring, aside from the, the ProfitWell acquisition and Patrick coming on as you know, Chief Strategy Officer.
You've been, you've been hiring senior people around you. How, how has, how has that affected your, like are you, are you comfortable in that new role? Do you still love to noodle with products? Do you still find time to, to, you know, set aside where you can, you know, whether it's in your spare time or weekends to do that? How do you spend your time these days and, and how much are you involved in the product?[00:50:02] Christian: It's certainly a very different gig even to the last time that we spoke. In terms of just like the scale of things and, and sort of it's running a 400-person sort of company is different to running a hundred-person company and, and sort of, I'm sure running a thousand-person company will different again.
For me, I just like learning. I'm like from the very beginning, I like learning, I like being curious and I like kind of building things, whether it's directly building them or, or sort of just being involved in building them. I try and spend as much time as I can on product especially some of the, the future, bigger bets sort of like what are the, the swings that we're gonna make that may be sort of riskier than kind of the functionality or the roadmap that we know that we should build and that we are building. So I tend to spend some lot of my time on that. I kind of see all of these things.
I was having a conversation with somebody earlier today about, about finance and sort of, kind of, they were like, Oh, this person, it was about kind of our org. And they were like, Oh, this person sort of, they can engage with that stuff, but they, they don't really enjoy it. Like spreadsheets and getting right in the details and things like that.
And for me it was, it was like, Oh no, I actually kind of really enjoy that because I kind of see almost every problem as another product problem or another engineering problem, more engineering problem. But for me it's something like finance and figuring out kind of how we do a plan for next year or kind of whatever it is, sort of, and, and digging into the details of that and the assumptions that we're gonna make and kind of and sort of how these things work. It's just another problem to go and solve. And fundamentally, I think I am motivated and interested in kind of seeing a problem and then going and try and fix it.
I think kind of actually sort of playing therapist with myself kind of in real-time. That's probably, that's basically what I've done for the last 10 plus years of building kind of each of, well, 15 plus years of building each of these companies. So sort of, I think if you look at it on a micro level in terms of basically all you're doing is you're solving different problems at a bigger scale.
And I still get to do that every day, so I still enjoy that. I mean, the, as much as I kind of enjoy those things, there are obviously things that I don't enjoy and obviously there are problems and there are things that go wrong and at scale, each of those things is amplified. But you also have the benefit of being able to do it with kind of like you mentioned, surrounded by a team of really experienced people who I've been able to kind of accrue and build over time as well.
So it's, it's kind of like there are ups and downs to this. There are, there are things that are wildly more interesting and things that are wildly less interesting, but kind of there are kind of counters to each of those points. Still enjoy it is a different job. Spend as much time as I can on product, but usually kind of more further out product, whereas, whereas previously I was probably thinking about what we were gonna ship next week.
Now I'm trying to think more about what are we gonna ship sort of a year or two from now, and what are we start, need to start working on today in order to make those things more of a reality.[00:53:06] Omer: Yeah, I'm with you. I think that if, if you, if you have a, if you have a, if you're naturally curious and you have this desire to learn, there's always opportunities to do something exciting or something interesting every day. And, and some of the smartest people that, that I've ever worked with just are just super curious people. And they just either make you think differently or ask questions in a way that exactly the way you said is this. Like, you, you, rather than seeing problems as problems, you see problems as interesting opportunities. Right?
And, and that, that I think is a really, really, really kind of a positive way to look at, look at things. And it's obviously working for you, . All right. Let's get onto the lightning round. We've done, we've done this before. So I'm gonna ask you seven quickfire questions. Ready?[00:53:58] Christian: Yep. [00:53:59] Omer: What's the best piece of business advice you've ever received? [00:54:02] Christian: Go slow to go fast. [00:54:04] Omer: What book would you recommend to our audience and why? [00:54:07] Christian: I think I gave this answer last time, but it's, “The hard thing about hard things”. And the reason why it should've like, It's one of those books that doesn't gloss over the, just like the mess that is sometimes creating a company. And I really like it just for its honesty in, in that regard. [00:54:27] Omer: What's one attribute or characteristic in your mind of a successful founder? [00:54:30] Christian: Ability to listen more than you speak? [00:54:33] Omer: What's your favorite personal productivity tool or habit? [00:54:36] Christian: I like to write everything down and make lots of notes. So it's an app called Bear. [00:54:41] Omer: I Love Bear, great app. What's new crazy business idea you'd love to pursue if you had the extra time? [00:54:47] Christian: There are a handful of people who are building kind of these interesting sort of, they're sort of like rolling up small, profitable SaaS businesses. They're creating like these micro private equity firms where they're going and buying very small products that solve really discreet problems.
So it might be kind of, scheduling for hairdressers who are kind of remote freelancers, and it'll be a little business that does 5,000 bucks a month and generates tons of profit and they're kind of rolling these things up. And I think that would be an absolutely fascinating way to kind of just like learn and build a, a big kind of holding company private equity thing. So I think that would be super interesting.[00:55:30] Omer: Yeah, that's a super interesting space. And I think one of the things that even now, after having done this and spoken to hundreds of thousands of, of founders is that it's like people just keep telling me about business ideas and I'm, I like never even imagined, you know, these markets existed. Right?
It's just super fascinating how deep and how, how, you know, you can go into these, these kinds of micro opportunities. What's, what's an interesting or fun fact about you that most people don't know?[00:55:56] Christian: I think most people know it at this point, but I've never had a job. This is the only job I've ever had. So I've never seen good culture, good leadership, good management. I've never seen good, bad leadership, bad management, bad culture, other than other than in the company that I've built. So one day I'll join a different one and I'll find out if I was doing it all wrong. [00:56:20] Omer: And finally, what's one of your most important passions outside of your work? [00:56:23] Christian: I am in the process of buying a house in the countryside. It's in a big, it's basically in a, the middle of nowhere. And I am very excited about, it's also sort of very unloved and hasn't been lived in for many years. So I'm very excited about turning it into something great. So yeah, it's sort. I like, it's apparently it's building stuff that isn't, isn't made of, of bits and is instead made of atoms.
So kind of continuing to probably solve problems and have lots of stress and headaches, but just in a slightly different medium.[00:56:59] Omer: That sounds fun. My you know, my wife and I moved from, from England, I guess it's been like 16 or 17 years now to the Seattle area and for, for the last four or five years we've been watching people here won't know the show, but I'm sure you will like, escape to the country.
But it's basically like house hunters or they have hair on, on tv, but it, but people, you know, basically buying homes in the countryside in England and living in the middle of nowhere. And we, we kind of often talk about that. It's like, if we ever went back to England, we'd probably wanna do something like that.
So, although, although I think we wouldn't, we wouldn't take on a project like it sounds like you were doing, it sounds like there's, there's a lot more work involved there too.[00:57:37] Christian: Yeah. I have to figure out my DIY skills and if they are any good so we will, I'll, I'll keep you updated on that one, maybe that's one for the next episode.
We can, we can, we can figure out in three, maybe in three in three years' time if it was all a giant failure or not.[00:57:53] Omer: Yeah, I'd love to do that. All right. Awesome. So if people wanna find out more about Paddle, they can go to paddle.com. If folks wanna get in touch with you, what's the best way for them to do that? Where do you hang out? [00:58:04] Christian: The best place is Twitter. I spend far too much time on Twitter, so I'm just christianbowens on Twitter. Or you can email me just Christian[at]paddle[dot]com. [00:58:14] Omer: Christian, thank you so much. It's been, it's been a real pleasure. I had a lot of fun talking last time. It's great to do an updated episode here and, and kind of share the story.
Congratulations on, on, you know, continuing to, to grow this business. Also I appreciate you, you know, being willing to talk about some of the challenges and, and the, the difficulties along the way because I think, you know, as, as the business gets bigger, some of those things, you know, not kind of you, you, you know, you have a lot more, a lot more to deal with and, and so being able to go back and talk about some of the details and the struggles I think is, is always helpful, especially for people are the founders who are at sort of an earlier stage than you.
So thank you for doing that and you know, wish you and the team the best of success and good luck with the house in the country.[00:59:02] Christian: Thank you very much and it's been great. I really enjoyed it myself. [00:59:05] Omer: Awesome. Cheers.
- “The Hard Thing About Hard Things: Building a Business When There Are No Easy Answers” by Ben Horowitz